4 Questions to Ask when Choosing a Budgeting and Forecasting Platform

In almost every decision they make, executives today consider some kind of forecast. Predictions of demands and trends are no longer a choice, but a necessity, if managers are to cope with seasonality, changes in demand levels, swings of the economy and cut-throat competition. Forecasting can help managers and executives deal with these troubles and support better decision making.

Being aware that budgeting and forecasting allows you to anticipate the future, manage most parts of the business, control operations and increase your knowledge of the marketplace, organisations need to be able to fully utilize these processes to benefit from it.

While smaller sized businesses are rather straightforward, and budgeting and forecasting can be managed with old methods like spreadsheets, organisations with more complex operations, turn away from tools like excel and place their focus on more powerful tools like software solutions.

Many financial leaders are coming to the realisation that they can dramatically improve the efficiency of what they do by upgrading the solutions they use for budgeting and forecasting. To handle the increasing variety and complexity of managerial forecasting problems, many forecasting platforms have been developed in recent years.

Since every business is different, it is important to ask the right questions to find the software solutions that answers to the individual needs and requirements of the company.

1. What do I need the software to do?

The first step for a business considering a forecasting platform is determining your process, technical and system needs; your budget and other constraints; and a detailed list of requirements. Most systems contain the industry standard forecasting algorithms but depending on the nature of your industry you might also need some of the more advanced tools on the market. For example, advanced analytics like machine learning, AI, Monte-Carlo simulation and Stochastic Optimization.

Going through the design process provides you with a systematic approach to work from an abrasive concept down to technical details for the solution. Establishing the benefits, you want to gain from the forecasting solution, will define the features that are required to achieve them.

2. Do I have the right data available?

To create meaningful forecasts, businesses need to have the right systems and measures in place to gather data. By having the right data on hand, forecasts will provide valuable insights that allow better planning and decision making.

3. What is the purpose of the forecast—what is it to be used for?

The answer to this question determines the power and accuracy of the software solutions. If the forecast is being used to set a ‘’standard’’ to compare the current performance to the historical performance of the past years, trends and unusual events don’t need to be considered.

However, most of the time, it is not enough to know how the business will behave if nothing changes, because changes happen all the time. Therefore, a more sophisticated solutions needs to be adopted that takes in trends and changes in consumer behavior. When accounting for uncertainty, forecasts will be more realistic and enable accurate planning and strategy development.

4. How important is the past in estimating the future?

How does your business operate and what are the challenges it is faced with?  Does your business operate in a fluctuating business environment where new product, new strategies and swings in economic structures are normal? Do short term changes affect the future of the organisation or is the company build in a solid and resistant environment.

An organisation that is faced with uncertainty and noticeable influenced by changes of external factors, requires a more complex budgeting and forecasting solution that accounts for these risk.

Additionally, if the future happens to change, a new forecast needs to be developed. If this process would be automated, this could be done fast and easy. For this purpose a software solution with the feature of creating rolling forecast would be suitable.

Conclusion

Every business forecast to gain a better understanding of where their business is and where it’s going. Today’s forecasting solutions allow organisations to automate processes and paint an accurate picture of the business and its potential future. By choosing a forecasting platform you can make a habit of looking ahead and prepare your company for both unexpected road bumps and future success. Ask yourself the four questions today to make better decisions tomorrow.